FX.co ★ Citigroup to pay couple $3M for broker’s inaccurate forecast

Citigroup Inc. will pay a couple $3.1 million for not overseeing a broker, Reuters said on

September 17. The securities arbitration panel, created by the Financial Industry Regulatory

Authority, found the bank liable for losses. However, Citigroup proclaimed that it disagrees

with the award which was not supported by the facts or law.

Yet in 2010, Nasirdin Madhany and his spouse Zeenat Madhany residing in Orlando, Florida,

accused the bank of negligence, fraud and other misdeeds involving more than $1 million

in real estate investments they made. They both were customers of Scott Andrew King who

worked in Citigroup in 2002-2005.

The pair contends that King steered them to invest in a politician’s real estate developments,

Lawton Bud Chiles III, peddling investments privately. In 2007, when housing market collapsed

in the USA, Madhany’s investments depreciated. Moreover, the Madhanys and several

other investors signed personal loan guarantees in connection with a $12 million loan to

one of the projects by Wachovia Bank which went broke in 2009. Wachovia in turn sued all

the participants when the loan defaulted. The panel ruled that Citigroup must reimburse the

couple’s share of $10 million in the event they are required to pay the judgment amount.

The regulations of the U.S. financial industry prohibit the practice of “selling away”, when an

advisor vends investments without a firm’s knowledge.

Currently, Scott King is a broker for Wells Fargo. Both he and his current employer are not

available for comment.